Industrial Capitalism and Its Defenders

Scale changes everything

Railroads created the first truly national market and the first corporations too large for any state to regulate. Carnegie used vertical integration — owning every stage from ore to finished steel. Rockefeller used horizontal integration — buying or crushing competitors in refining until Standard Oil controlled most of the industry.

New organisational forms followed: trusts, then holding companies, each designed to concentrate control while satisfying the letter of the law.

The justifications

• Social Darwinism — competition sorts the fit from the unfit; intervention interferes with a natural process.
• Gospel of Wealth — Carnegie's argument that the rich should administer their fortunes for public benefit, but on their own terms and by their own judgement.
• Laissez-faire — government interference distorts efficient markets.

How courts used the 14th Amendment

This is the exam's favourite irony. Courts of this era interpreted the 14th Amendment's due process clause to protect corporations' freedom of contract — striking down maximum-hour and minimum-wage laws as interference with a worker's right to agree to any terms.

The clause written to protect freedpeople became, in practice, the main constitutional shield for industrial employers. The amendment was not amended; its interpretation was.

Regulation begins, weakly

The Interstate Commerce Act (1887) and Sherman Antitrust Act (1890) were the first federal attempts. Both were vaguely worded and weakly enforced — and the Sherman Act was, in its early years, used more often against labour unions than against trusts.